October 04, 2007
New Pax World Value Fund Follows "Contrarian Value" Strategy
by Anne Moore Odell
Pax World's new Fund travels the globe looking for sustainable, yet undervalued companies.
When Pax World launched the very first
socially responsible mutual fund in 1971, they had no way to forecast how large their family tree
of socially responsible funds would grow. Recently, the Portsmouth, NH-based Pax World added a new
Fund to the family: the Pax World Value Fund (ticker: PAXVX).
Pax currently offers a Balanced Fund, a Growth
Fund and a High Yield Bond Fund. The newly launched Value Fund rounds out its offerings by
exploring new US and global companies. Shareholders in any of Pax World's Funds can take part in
its Global Citizen Program that allows shareholders to contribute part of their dividends to Mercy
Corps, a humanitarian relief organization not affiliated with Pax World Funds.
Pax team member Sujatha R. Avutu will guide the portfolio. Avutu was hired in July as a senior vice
president and senior portfolio manager at Pax World.
As a value fund, Pax Value Fund will
include large-cap companies that are considered undervalued in terms of future growth potential and
compared to their peer industry companies. Importantly, these companies must also pass Pax's
sustainability standards. Pax examines companies past environmental, social and governance (ESG)
performances carefully before including them in their portfolios.
"Pax World Value Fund
fills in an important style niche for investors," said Avutu. "As a value-oriented manager, we
believe - and we think the evidence shows - that a strong sensitivity to valuation and price will
benefit an investment portfolio over the long run. That's true of value funds in general."
"We envision the Value Fund as a core foundation with lower volatility and higher dividends
than its peer group under normal conditions. We believe it is properly viewed as an anchor holding
in a diversified portfolio, so to that extent, it may well be an appropriate holding for many
investors," Avutu continued.
The Fund is built on a "contrarian value" approach. Avutu
describes this method as one that buys "great businesses at good prices and good businesses at
great prices." Pax World Value Fund is dominantly a domestic value fund that may invest up to 45%
in international stocks, including foreign companies that are traded on US stock exchanges, also
known as American Depositary Receipts (ADRs).
This approach is especially effective on a
global scale, Avutu believes, with consideration of the growth in infrastructure industries in
"Given that we are truly in a global environment and a global
economy, we see less and less rationale for making distinctions based on where a company is
domiciled," Avutu said. "Investors should know that we are not afraid to go where the investment
opportunities are --whether that's here in the US, or in international markets where GDP growth
has been much more attractive of late. The long and short of it is, we look for attractive
investment opportunities wherever they may appear."
Pax's ESG criteria are grouped into
five categories: environmental impact, community impact, workplace practices, product safety and
integrity, and corporate governance. In each category Pax looks for companies' programs and
policies governing performance to identify well-managed companies that present fewer risks
Avutu explained, "ESG catastrophes take many forms: an oil company has a major spill; a
transportation company becomes a defendant in a massive EEO discrimination class-action lawsuit; a
company must restate its financials due to extensive stock-option backdating. Any of these, as
well as any of hundreds more, can have a lasting impact on the company's reputation and financial
Pax's ESG investment philosophy states that companies that recognize the
importance of managing ESG variables are likely to be well managed in many ways, and that these
companies offer the best options for durable additions to shareholder value.
environmental footprint of any company depends on its sector, Avutu pointed out. The energy
business, for the most part, typically involves far more environmental impact than, as an example
Avutu supplied, high tech. Pax's mangers have consistently found that there is a substantial
difference between the ESG policies and performance of leading companies and that of laggards,
within industries and sectors.
"We believe that by investing in leaders and using
shareholder advocacy to improve their practices, we can advance sustainability and raise the
standard of practice for all companies," Avutu said. "We have often observed that once one or more
companies adopt new sustainability metrics or policies, others follow, often quickly.
minimum individual investment in the Fund is $250. Institutional investors can invest in the
Institutional World Value Fund (ticker: PXVIX) with a minimum investment of $500,000.
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